The Reality of Obtaining Mortgages In Spain (March 09)


Buying activity appears to be increasing, as property bargains become a real reality in Spain.

Apartments previously marketed at knocking € 200k can now be picked up regularly for € 100k  making the dream of having a Spanish holiday home more achievable even in today’s troubled times.

The 12 Month Euribor, which most banks use for Spanish mortgage purposes, continues to drop and is now below the 2% level.

In response to this very low Euribor rate and in effort to control their lending levels some banks have increased the margins above which they offer mortgages at.

UK based Leeds and Holbeck this week increased their margin above the 3-month Euribor to 1.8% from 1.25% for their loan to values of 65% of purchase price. For loans at 40% of purchase price, the margin above is now 1.4%.

Whilst given base indexes are low at present if rates increase in the future this sort of margin above will be very costly for the mortgage holder.

Leeds and Holbeck cash back re-mortgage product increased to 2.3% above 3 month Euribor making any move to this lender a costly alternative and should see all cash back re-mortgage business dry up if clients are given accurate advice in first place.

Most Spanish based lenders with no UK roots have not jumped on the increased margin bandwagon in the same way as the UK based lenders have and are maintaining for present margins above for non-resident mortgages from 1% to 1.5%. Underwriting criteria’s for these lenders has however hardened making approvals difficult to get unless clients have good deposits and low existing debt levels.

For buyers with 40% to 50 % cash deposits however lending is still available with a good range of choice and the bargains are definitely there to be had for clients willing to put good levels their own cash in.

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